Snapdeal plans to fire 30% staff in 2 months to cut cost

In February 2016, Snapdeal had put over 200 employees on a Performance Improvement Program and eventually let go of the additional staff.Payal Ganguly&Biswarup Gooptu | ET Bureau | February 11, 2017, 07:47 IST

BENGALURU/NEW DELHI: Snapdeal aims to trim about 30% of its workforce over the next two months, according to four people aware of the plan at the Gurgaon-based company. The online marketplace plans to drastically cut costs as the Indian ecommerce industry battles slowing growth and a paucity of investors willing to provide fresh rounds of funding.

The move is expected to affect about 1,000 employees directly employed by the company in its ecommerce marketplace while thousands of contract workers in the company’s logistics division are also expected to be let off, said the people cited above. “5,000-odd contract staff employed by the company’s logistics subsidiary Vulcan Express will be pared down as well as about 3,000 people on the rolls of the logistics company,” said a company executive and two consultants working with the company.

In an email sent out to managers within the marketplace operations earlier this week, the company asked them to “right-size” their respective teams. With this round of layoffs, the company is expected to let go of about 1,000 from the marketplace. According to one of the people quoted above, the latest round began last week.

Jasper Infotech, which owns and operates Snapdeal, last raised funds in August 2016 at a valuation of $6.5 billion. A representative for Soft-Bank-backed Snapdeal said the company “will continue to assess resource allocation”, in an emailed response to ET’s queries.

The company did not respond to specific queries from ET on the plan to lay off employees “On our journey towards profitability, it is imperative that we continue to drive efficiency in our business, which enables us to pass on the value to our consumers and sellers. As in the past, and like all good companies do, we will continue to assess resource allocation in furtherance of our goals of enhancing customer and seller experience while driving high quality growth,” the company representative wrote.

In February 2016, Snapdeal had put over 200 employees on a Performance Improvement Program and eventually let go of the additional staff.

Jasper Infotech employs about 10,000 people across all operations, including the ecommerce marketplace Snapdeal, payments platform FreeCharge and logistics and supply chain arm Vulcan Express, according to company representatives.

This estimate also includes over 5,000 contract workers in Vulcan. The CEO of a Delhi-based ecommerce firm said that “Snapdeal is under tremendous pressure to achieve targets similar to last year with 30% less resources”, adding that his company had seen a surge of resumes from Snapdeal in the past six months.

“The company now has an investor which has suddenly gone cold on India and is looking to right-size operations by reducing discounts, which in turn will reduce orders and requirement of staff,” said one of the sources cited above.

The company’s employee-related expenses rose to Rs 911 crore in FY 2016, up 148% from the previous fiscal. Employee expenses is the largest cost for Snapdeal after marketing and advertising. But unlike the latter, which is a variable cost, wages is a fixed cost.

For the financial year 2015-16, the company’s total sales grew 56% to Rs 1,457 crore, but losses more than doubled to Rs 2,960 crore.

The decision to further reduce its workforce also comes on the back of the company’s decision to shut down Shopo, the Etsy-like online consumer-to-consumer platform for small sellers that it relaunched in 2015, and in which chief executive Kunal Bahl had said the company would invest $100 million.

Jasper Infotech has been struggling to raise a fresh round of capital. Attempts to raise capital for FreeCharge independently have also not yielded any results.

The company has seen a series of senior-level exits, including senior vice-president of partnerships and strategic initiatives Tony Navin, senior vice-president and head of the consumer-to-consumer platform Shopo Sandeep Komaravelly and Abhishek Kumar, head of corporate development over the past few weeks.

“These senior-level exits are on account of the executives looking out for better opportunities. The layoffs are primarily directed at mid-level employees and new hires about to complete a year,” said the first source.

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